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March WTI crude oil (CLH26) on Friday closed down -0.21 (-0.32%), and March RBOB gasoline (RBH26) closed up +0.0069 (+0.36%).
Crude oil prices gave up an early advance and turned lower after President Trump ratcheted down the war rhetoric over Iran and said he had overnight discussions with Iran and indicated he expected them to continue, easing concerns about an imminent US attack on Iran. Friday’s stronger dollar (DXY00) was also bearish for crude. Crude prices have been underpinned this week after President Trump warned Iran to make a nuclear deal or face military strikes.
On Thursday, crude oil climbed to a 4.25-month high and gasoline rose to a 2-month high after President Trump said that US ships he ordered to the Middle East were ready to fulfill their mission “with speed and violence, if necessary” if Iran fails to agree to a nuclear deal. An attack on Iran, OPEC’s fourth-largest producer, could disrupt the country’s crude supplies and potentially close the Strait of Hormuz, through which about 20% of the world’s oil passes.
Crude oil also has support after Russia recently threw cold water on hopes of a breakthrough in peace talks with Ukraine, after the Kremlin said the “territorial issue” remains unresolved with Ukraine, and there’s “no hope of achieving a long-term settlement” to the war until Russia’s demand for territory in Ukraine is accepted. The outlook for the Russia-Ukraine war to continue will keep restrictions on Russian crude in place and is bullish for oil prices.
The IEA last Wednesday cut its 2026 global crude surplus estimate to 3.7 million bpd from last month’s estimate of 3.815 million bpd. On January 13, the EIA raised its 2026 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month, and cut its US 2026 energy consumption estimate to 95.37 (quadrillion btu) from 95.68 last month.
Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days fell -0.6% w/w to 113.30 million bbl in the week ended January 23.
Crude garnered support after OPEC+ on January 3 said it would stick to its plan to pause production increases in Q1 of 2026. OPEC+ at its November 2025 meeting announced that members would raise production by +137,000 bpd in December, but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC+ will meet this Sunday to review a decision on output policy and is expected to stick with plans to keep oil production steady. OPEC’s December crude production rose by +40,000 bpd to 29.03 million bpd.
Ukrainian drone and missile attacks have targeted at least 28 Russian refineries over the past five months, limiting Russia’s crude oil export capabilities and reducing global oil supplies. Also, since the end of November, Ukraine has ramped up attacks on Russian tankers, with at least six tankers attacked by drones and missiles in the Baltic Sea. In addition, new US and EU sanctions on Russian oil companies, infrastructure, and tankers have curbed Russian oil exports.
Wednesday’s EIA report showed that (1) US crude oil inventories as of January 23 were -2.9% below the seasonal 5-year average, (2) gasoline inventories were +4.1% above the seasonal 5-year average, and (3) distillate inventories were +1.0% above the 5-year seasonal average. US crude oil production in the week ending January 23 was down -0.3% w/w to 13.696 million bpd, modestly below the record high of 13.862 million bpd from the week of November 7.
Baker Hughes reported Friday that the number of active US oil rigs in the week ended January 30 was unchanged at 411 rigs, just above the 4.25-year low of 406 rigs posted in the week ended December 19. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported in December 2022.
